Despite anxiety around the shift of focus of clinical guidelines from LDL-C goals to [cardiovascular] outcomes, we see this as a net positive for the class. Increased focus on the use of statins and on maxing out statin dose will drive an increase in intolerant or insufficient responders to statins. We estimate the most likely scenario – approval for these two populations of statin-experienced patients, along with heterozygous familial hypercholesterolemia (HeFH) – to yield a peak revenue opportunity in 2020 of $7-$8 billion for anti-PCSK9 as a class.

Investors, however, might be questioning the revenue opportunity for all biotech drugs after three Democrats asked Gilead Sciences why it has to charge so much for Sovaldi. RBC Capital Markets’ Michael Yee and team think the fears are overblown. He explains:

This seems like a lot of political gesturing but unlikely to turn into any real change. Bottom-line, we are buyers of this recent weakness and in our layman’s view, we believe they are encouraging [Gilead Sciences] to reach pricing concessions especially for economically disadvantaged patients. This is not the same as an attempt to curb or regulate pricing of pharmaceuticals.

Shares of Gilead have dropped 2.5% so far this year, while Amgen has gained 9.3%, Celgene has fallen 13%, Alexion Pharmaceuticals has climbed 24% and Biogen Idec, whose hemophilia drug Alprolixwon Canadian approval, has advanced 19%.

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There are 3 comments

MARCH 21, 2014 12:29 P.M.

muskateer wrote:

I believe people are forgetting about how much it costs to bring a drug to market. First, didn't Gilead pay $11billion for the rights to Sovaldi? Second, how much does it cost for clinical trials? Finally, how much is spent on marketing and research. Compound that with the fact that there are competitors and a new line of treatments just around the corner (2-3 years or less0, and that doesn't make for a long period of time to recover the costs of development. For those complaining of the costs, they should start looking at what is or has driven up the cost of clinical trials, and congress should consider sending those people a letter. Although, I will have to say that $84K for a drug for 12 weeks does seem excessive I can surely see where they are coming from.

MARCH 21, 2014 3:28 P.M.

aldo wrote:

Waxman letter states that " our concern is that a treatment will not cure patients if they can not afford it". This is Waxman argument."That is what Representative Waxman needs to consider, the dramatic improvement in cure rates going from 55 percent to 95 percent on average, as well as the avoidance of all the debilitating side effects these other drugs cause,"Ian Somaiya said, Nomura. Other ANALYST REACTION: In a note to investors earlier today, research firm Piper Jaffray said the company would be able to "easily address" the lawmakers' questions. The firm expects the concerns to blow over, and kept an Overweight rating on the shares. Another firm, Deutsche Bank, said it does not see much that could impact Gilead's Sovaldi from the letter. The firm thinks Gilead has a strong case in arguing for their price and maintains a Buy rating on the stock. Also ISI sees no impact on sale of Sovaldi. Warren Buffet, when the great company's stock go down for no good reason it is a great buying opportunity.

MARCH 22, 2014 10:02 A.M.

clark gable wrote:

these co's are the biggest greed merchants in the world. they could be accused of much more in a moral
setting, which the USA is not. I speak from experience when I say that they continue to rip off people from
all over the world. ask why medicare cannot bargain with these devils and why their costs in foreign places
are as bogus as their integrity.

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